On March 8-9, 2018, a bespoke group of approximately 200 leading entrepreneurs, investors and advisors focused on deploying and commercializing cutting edge technologies gathered in Monte Carlo from across the globe for the 11th annual CleanEquity® Monaco Conference.  Complementing other plenary sessions and emerging company presentations, the conference initiated a new feature — Covington CleanEquity Conversations — intended to capture and memorialise the unique thought leadership opportunity presented by the gathering in Monaco. On the first day, conference participants separated into three breakout groups for Chatham House Rule discussions curated by partners from the international law firm Covington & Burling LLP of three critical issues confronting cleantech deployment and commercialisation:

  • AI and IoT – Benefits, Risks, and the Role of Regulation
  • Sustainability – What goals should businesses prioritise and what are the right metrics?
  • Will market driven innovation alone save us from climate change?

On the second day, the Covington team reported in the conference’s final plenary session key takeaways from the three breakout group discussions.  Covington and CleanEquity organizer and specialist investment bank, Innovator Capital, are pleased to share brief summaries of the thought leadership developed by the proceedings of conference participants on each of the three topics.

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Will Market Driven Innovation Alone Save Us from Climate Change?

This loaded question, perhaps more than the other two topics debated during the Covington-led sessions at CleanEquity, presents a fundamental challenge facing society.  The range of answers helps to inform the commercialization opportunities for the myriad technologies under development by CleanEquity’s presenting companies.  Each of the presenting companies offers some partial solution to climate change by making a process more energy efficient or sustainable.  But the solutions presented were generally early stage.  In order for these companies and their technology-driven solutions to thrive and be impactful, they need to have the right combination of receptive markets, appropriately costed capital for expansion,  and sustainable consumer adoption.

In a session led by Covington’s Scott Anthony, a partner in the firm’s Silicon Valley office, conference participants grappled with two aspects of the overall question:

  • Will technology innovation progress fast enough to overcome the effects of climate change?
  • Is the threat of climate change alone sufficient to incentivize society to find a solution?

The robust discussion benefited from the views of a diverse group of innovative entrepreneurs, investors and consultant thought leaders, but no government officials.

The Pace of Innovation is Quick, but Commercialization is Lagging 

The initial position asserted by the first speaker was that innovation had, in effect, already progressed quickly enough because the technology necessary to overcome climate change already existed.  Another individual agreed and noted that within the Conference alone, many technologies had the potential to mitigate or overcome the effects of climate change.  Several individuals commented that it would not be one single technology or sector, but rather a combination of technologies across many spaces that are deployed at a commercial scale that will be needed.  The group acknowledged the potential for wide deployment of solar power to mitigate climate change, but also recognized that there were many technologies that were part of the solar ecosystem or that would be able to take advantage of greener electricity.  The group also broadly agreed that the solutions went beyond just solar and included energy efficiency of all types as well as wind and alternative fuels.  In addition to energy generation, it was noted that technologies for more sustainable food production, waste disposal, packaging, transportation and energy transmission and management would be essential to effectively combating climate change.  Companies with potentially commercializable solutions in each of these industry sectors were present at the conference.

While the group agreed regarding the existence of potentially viable technologies, the group also observed that all of the new technologies face the common challenge of market acceptance and adoption.   New technologies struggle to compete with existing technologies and to overcome barriers to widespread adoption that threaten their existence.  Commercialization was viewed as the key and impediments to commercialization were discussed as a critical issue.  One person commented that improper or inadequate pricing of carbon emissions generated through the use of traditional technologies adversely impacts the adoption and commercialization of new technologies.  Once the externalities of carbon emissions are taken into account, the group felt that newer technologies would have the potential to be more economically competitive and thereby more readily adopted at a meaningful scale.

Threat of Climate Change Alone is Not Sufficient to Produce Necessary Innovation — Government Intervention is also Needed

One might have expected a gathering of entrepreneurs and investors to favor a free market approach where the best technologies and businesses thrive and profit on their own merits.  Investors are reluctant to risk their capital on the basis of government policies that are subject to change.  Nonetheless, the group coalesced around the view that the threat of climate change alone would not be enough and that market intervention by governments would be required to assure that effective technologies are adopted at scale.

One person commented and others agreed that without government intervention, society would not be able to achieve near or long term climate change goals.  Without discussion of specific government policies, the group acknowledged that the general goal of policies should be to enable climate friendly technologies to achieve commercialization and to compete with existing legacy technologies.  Complexity of determining the “right” policies was recognized, but the goal remained.  The discussion noted that different areas and countries would have and need different policies and incentives.  There is not a one-size fits all set of policies.  But the need for governments to play an enabling role was widely accepted.

One person commented that human behavior is very difficult to change.  People and societies have established practices that tend to be reinforced by established incentives.  Overcoming the inertia of existing regulations and practices requires effort.  Without new and different incentives, mandates or other factors driving behavior change, it is likely that established norms and practices  would continue to prevail.  For example, one commentator raised the question of how many people attending the conference used renewable energy in their home or drove hybrid or all electric vehicles.  For such an economically advantaged and highly educated segment of the population at the forefront of technology and well aware of the dangers of climate change, the number  was remarkably low.  A participant noted that some individuals do not necessarily see the need to make personal sacrifices when the various state actors are not in agreement as to national and international policies regarding climate change.  Another participant asserted that perception of the need for change is lagging behind the actual need for change.  There was general agreement that society did not feel the pressing need to change current behavior.  Another person suggested that the climate needed the equivalent of a “#metoo” movement to raise awareness and galvanize action.  Something that motivated people to reflect on their own actions, call out the bad actors and to change the conversation.  One commenter offered that rational arguments have not been sufficient to change behavior, climate conscious behavior needs to become more recognized as the “right” thing to do if people are to change their behavior.

Shifting the discussion to the role of governments in changing behavior, the group agreed that concerted international efforts involving all nations would be important.  One commenter suggested that so long as some countries and peoples could continue to deploy old technologies and practices, other countries would not have an incentive to adopt and pay for new technologies and practices.  It is the collective action problem on a global scale.  Another participant  noted that many political leaders lack the political will or desire to adopt climate friendly policies.  The group generally acknowledged there were and are many reasons for the lack of political will, but still faulted political leaders for failing to lead in an area that is so critical.  One participant observed that the political will of the leaders is influenced by the absence of a clear mandate from their citizens.  Another commented that part of the problem is the portrayal of climate issues in the media.  Popular media was credited with the power to help shape and influence the perception of the need for change and thereby the mandate of politicians.  While the media’s role was viewed as important, one participant brought it back to a failure of leadership at the highest levels.

Amplifying this thought, another participant suggested that the nature of democratic societies was partially to blame for the paralysis of political leaders.  The clash of various constituents and interest groups all seeking to influence the system invariably leads to a slower process as incumbents who are threatened by new technologies and business practices are economically incented to slow the pace of competing change.  These competing voices are reflected in the political system.  The group then discussed the success of Germany in adopting solar energy through a program of incentives and targets and that Germany succeeded in this effort despite initial skepticism.  Some of that success was attributed to German citizens wanting to “do the right thing” and adopt solar.  Another important factor was the government’s commitment.  The group then compared Germany’s success with the development of solar energy in China.  The group generally acknowledged that China, because of the government’s ability to control its economy, had the ability to mandate change more rapidly and broadly than any Western government.  Some participants expressed admiration for China’s ability and willingness to establish specific targets and to execute on plans to achieve those targets.  There was general acknowledgement, however, that China’s ability stems from the government’s control of Chinese society in general.  Nobody in the group advocated that Western governments be more like China.   But there was a desire for Western governments to take more of a leading role in promoting climate friendly policies and helping to solve the problem of getting climate friendly technologies to market.

Conclusion

The conversation covered many issues and raised important questions and observations.  A consistent theme throughout the conversation was the need for governments to take a leading role in promoting climate friendly technologies.  Only governments would have the ability to adopt policies that will cause enough behavior to change.  Which specific policies and behaviors were beyond our group, but it was clear that the group believed that while the technology exists to combat climate change, government action will be required to facilitate adoption and commercialization of that technology.